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Samko Timber unit to buy Sumber Graha Maluku stake for up to US$20.7m

MAINBOARD-LISTED Samko Timber's unit PT Sempurna Graha Abadi (SGA) will buy a 51 per cent stake in PT Sumber Graha Maluku (SGM), and will pay up to US$20.7 million to SGM's parent company PT Barito Wanabinar Indonesia (BWI).

SGM was incorporated in March 2019, and has not conducted business since. The deal will see SGM become an asset-holding vehicle that will acquire industrial forest plantations, forest concession rights of about 59,138 hectares in Indonesia, licences, plywood factories and other assets to be owned by five operating companies which are to become its subsidiaries.

The valuation of US$20.7 million was arrived at based on a preliminary estimation of the total investment outlayrequired and the estimated value of BWI's non-capital contribution to the assets mentioned. The purchase will be funded through the group's internal resources and/or loans from financial institutions.

SGM will become SGA's subsidiary, with a board of directors that comprises a chief executive officer and chief operation officer nominated by SGA, and one director nominated by BWI.

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Wood resource processor Samko Timber said the deal involves a business that is complementary to its core business and allows it to expand operations into new Indonesia locations.

It will also be able to "seize lucrative business opportunities through its partnership with BWI" that were previously not available. BWI is a subsidiary of PT Barito Pacific Tbk, a public company listed on the Indonesia Stock Exchange whose core businesses are power generation and petrochemical production.

As part of a Series A share subscription deal, which is is pending approval from shareholders of Samko Timber and SGM, BWI will also have the right to require SGA to purchase the remaining 49 per cent of shares held by BWI.

Completion of the share subscription will take place within five business days after all completion conditions have been met, with a Jan 30, 2020 cutoff date.

For illustrative purposes, the net tangible asset per share of the group for FY2018 would be 85 rupiah (S$0.0083) before the deal and 108 rupiah after. Its earnings per share would be 28 rupiah before the deal and 26 rupiah after.

Samko Timber shares were unchanged at S$0.024 as at 12pm.